Works contract classification before service tax levy required fresh examination before confirming the demand

Abatement under the relevant notification was held inapplicable to completion and finishing services, but the assessee contended that the activity was in substance a works contract with no free-supplied materials. Because works contract service was not liable to service tax before 1 June 2007, the nature of the activity had to be examined in light of the Supreme Court ruling before any demand could be sustained. The matter was remanded for reconsideration of the demand after determining whether the activity constituted works contract prior to that date.

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Issues: (i) Whether the demand could be sustained where the assessee claimed that the activity was undertaken as works contract prior to 1.6.2007 and the applicability of the Supreme Court ruling required examination.

Issue (i): Whether the demand could be sustained where the assessee claimed that the activity was undertaken as works contract prior to 1.6.2007 and the applicability of the Supreme Court ruling required examination.

Analysis: The notification granting abatement was held not to apply to completion and finishing services. However, the assessee asserted that the activity was performed under a works contract and that no free-supplied materials were received. Since works contract service was not liable to service tax prior to 1.6.2007, the nature of the activity had to be examined in light of the Supreme Court ruling and the demand could not be confirmed without that determination.

Conclusion: The matter was remanded for reconsideration of the demand after examining whether the activity constituted works contract prior to 1.6.2007.

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